W. Akin

Mr. AKIN

Mr. AKIN. And so if you got taxed a whole, whole lot, are you going to put money into new equipment and expanding your clinic, or is it going to have to go to pay your taxes?

Mr. AKIN. Now you're getting to the second point. You're already ahead of them. The first point is, if you want to kill jobs, take the money away from the owners of small businesses. You could say, Hey, that guy's making over 250,000, obviously having too much fun. We're going to tax him into the dirt, make sure he doesn't have a better time than we do. The only trouble is, if you want jobs, you can't destroy businesses. And that's the connection it seems like this administration, the Democrats, keep missing; and that is, if you keep talking about pounding rich people and those bad corporations, if you pound them into the dirt, there are not going to be any jobs. And that's where we seem to have this disconnect going on. So first thing is you do not want to tax those people a whole lot because you want them putting the money back into their business. The second point you're making, though, is all these regulations and redtape, it may not be a tax, but it has the same effect, doesn't it? Did you have to fill out a lot of paperwork in your business?

Mr. AKIN. Particularly in manufacturing, if you do that too much in manufacturing, it makes it so expensive to make something in this country, the guy who owns the business says, Hey, I've got an idea. I'll take this machine that makes good product and I'll send it to a foreign country where they don't have all that silly redtape and they don't have all those taxes, and I'll make the product over there. And so the jobs just disappear from us because of taxes and redtape. Now, there's another one that the people on Main Street in St. Charles talked about, too, and that is a little bit less tangible. It's the sense of unknown. It's the sense of fear because the government's doing one dumb thing after the next, and they're afraid to make a decision because of the instability. The economy is down. It's hard to get loans, and they're not sure what we're going to do. For instance, the big health care bill was pending, and so what are you going to do? Well, because you don't know the environment, you tend not to make a decision, don't take risks because it's a very tumultuous type of time. There's too much of a storm brewing, and you don't want to be out too far from shore when there's a big storm brewing up. And so people hunker down and they don't hire people. And so that's another thing. And we're doing all those things wrong. Even now we're doing those things wrong, and we wonder why we have unemployment. And, of course, the big one is government spending, and boy, are we doing that. You've got these entitlements that are out of control, and who's going to pay this tab? And so, you put all of these things together and you have almost a perfect storm on business. And people wonder, Gosh, why do we have over 10 percent unemployment? Well, it's because we're doing all the things to create unemployment. Please jump in, Paul.

Mr. AKIN. Oh, you're going to do the bailout drill. We're going to bail this one out but that one you don't get bailed out.

Mr. AKIN. Paul, I don't believe it. It's just like I'm stepping back in time to that Main Street in St. Charles, because you're bringing up that fifth point that they always talked about. It is sort of an ironic thing, because you've got Bernanke at the Federal level. The Chairman is creating all this liquidity. He's doing QE2, which sounds like a science fiction, and I think it may be science fiction economics. But anyway, he's creating all this money. They used to call it printing money. But he's created a whole lot of money at the top, and yet somehow or other the funnel got pinched off and the money's not coming down to Main Street. And part of the reason it's not is because all of these regulators are all over the banks second-guessing the loan. So if the businessman isn't fearful enough as it is, and if he does actually want to get a loan, he's finding that the banker is being awfully tough. And I think they're typically 5- or 7-year loans, is that right, gentleman?

Mr. AKIN. Is that what you're talking about, basically the banking regulators, the Federal regulators, are kind of looking over the shoulder of the small banks all the time?

Mr. AKIN. Thirty-nine percent liquidity; isn't that very, very high?

Mr. AKIN. Well, now the question is, if the banker is a businessman and he's taking risks and he wants to make a loan and when he makes a loan he gets some interest, and as long as the loan's good, then he makes money that way as a banker; now, if he wants to do that, why do we have a bureaucrat looking over his shoulder all the time, particularly as long as he's got a sufficient amount of liquidity to cover potential losses? Why is it that the regulators are deciding to regulate every aspect of our free enterprise?

Mr. AKIN. You get into this whole thing, and if you looked at what we have talked about tonight, you kind of start tearing your hair out and wanting to go buy some real estate on a desert island somewhere to get away from this huge problem. But there are solutions to this. But you have to realize where the solutions are. The first thing is you have to realize that we're not going to deal with the economic problems of our country until we can reduce the rate and the number of entitlements we've got. Now, somebody could object and say, Wait just a minute Congressman Akin, because couldn't you deal with these entitlements if you just got your taxes up higher? If you could get these taxes here that are running 18 percent, if we could double that, why don't we make it a 40 percent tax rate? Oh, that would take care of this, at least for a while. Let the entitlements grow and tax everybody at 40 percent. The problem is it doesn't work. And I think that's something that we ought to warn people about here. There's something here, this is sometimes now known as the Laffer curve, and what I have shown here is the top marginal income tax rate. Now, that doesn't mean that in 1960 everybody was paying 90 percent tax. These are the most well-to-do people. But this is what happened to the top tax bracket over time. We started to reduce the taxes on some of the very top income people, bringing them down more into this 30 percent range. Take a look at what happens to the Federal tax receipts. This is an example of the fact that you can actually reduce taxes and grow the revenue of the Federal Government. The reason that works is just what you were talking about. Because you are a businessman, you understand this stuff. And that is, what is happening is when a small businessman can invest in his own business, he creates jobs. With those jobs, people are paying taxes. That means more revenue for the government. So when you get the economy going, we take in much more revenue. So the first thing you can do is, actually, by reducing taxes, you can create more revenue, get the economy going, and that will help some. But it's not enough to deal with this entitlement problem. So really, you have a couple tracks you have to take on. One, you have got to cut the entitlements down. But you also likewise have got to keep working this advantage of getting your taxes in line to create a strong economy. Here is an example. When I was here in Congress, in the third quarter of 2003, we cut three taxes: Capital gains, dividends, and death tax. We cut all three. And this picture right here, this black line, is when the tax was cut, and this is the GDP. These are the GDPs from 2001 to 2003. And you can see, some of them we actually lost GDP. We got up to 2\3/4\ GDP. And then here, we do the tax cut, and take a look at what happens afterwards. The average GDP is 3.5 versus 1.1. So GDP jumps. So now we have cut taxes. And you'd think, well, maybe that's good, because now GDP is going. It gets the companies going, gets the pump primed. What else goes on at the same time? We've got this next chart. This is employment. This is before the same tax cut in May of 2003. You see, all these lines going down means loss of jobs. That means we lost jobs overall in the economy. The lines that go up were the months where we gained jobs. Take a look after the tax cut. Look at what happens. You get a whole lot more jobs being created. So if you have got better GDP, more jobs being created, you know what the final chart is going to show, and that is, quite simply, by cutting taxes we actually grew the Federal revenues. That's a good thing to be able to grow. It was down here at 1.7 trillion, jumped up to 2.5 trillion just by cutting taxes. What we did was, we cut taxes, and we ended up with increase in revenue. So there's two pieces to this equation. One, what we have got to do is adjust tax policy and create an environment in terms of redtape, in terms of Federal spending, in terms of tax policy, and in terms of allowing liquidity to be flowing through the banks. We have got to create something that's pro-business there. Why in the world would we be in the mess we're in now and have the highest corporate tax rates in the world? I just can't understand that. What is your take on that? Why would we do that?

Mr. AKIN. I think you are right. I think in a way the cuts that we are going to be talking about this week, while they are not going to fix the overall problem of the fact that entitlements are out of control, I think that there are some things that they will do. And I think that what they will do is to maybe deal with some of that redtape. Because if you cut some of these agencies that are producing all that load of bureaucracy and redtape and all kinds of extra overhead, as you start to reduce that, it is like taking weight off of a runner; they are going to run faster. The economy will run better. And some of those cuts are probably Draconian in many people's eyes, and probably some of them are counterproductive. But, overall, you know you have got to trim up. So that is what we're going to be talking about doing. We are going to be kind of working it from both ways. We are going to have to cut the Federal spending, but we're also going to have to create an overall policy in terms of policies, that is redtape, and limit the amount of redtape, and the tax cuts to basically create a pro-business environment. When you do that, the revenue is going to grow, the size of the government is going to shrink, and you will start to see the shift come back to normal and America will start moving forward again.

Mr. AKIN. Well, that's a great way to end things up tonight. Thanks so much for joining us. I know the people of Arizona are tickled to see that their new Congressman is already earning his keep down here. And goodnight to you, and goodnight to my many colleagues and the people across America. We're looking forward to a brighter day, but we have some tough decisions to make, and we're getting ready to make those even this week. God bless you all.

Mr. AKIN

Mr. AKIN. Mr. Speaker, congratulations. You look good up in the Chair there. We are going to have a chance to talk for just a few minutes about an interesting topic. It is something on the minds of Americans everywhere, and that is about jobs, about the deficit and about Federal spending and what we have to do in those areas. I think sometimes it is helpful, you hear so much detail that you need to step back at the 30,000-foot view and say what is the big picture of what is going on. So I have here one of those traditional pie-type charts, and it has an overview of the total spending of the Federal Government in the year 2010. So what I want to do is just take a look at that and then talk about what that means relative to the problems we have in overspending in the Federal Government. Also, this connects to unemployment in this sense, that when the Federal Government spends too much money and is too intrusive and takes too much in taxes, all of those things destroy the jobs created by small businesses. So let's just be completely clear. We have heard stories about unemployment and these ``heartless Republicans.'' The problem is that if you destroy businesses, you don't have any businesses, you don't have any jobs. And that is what we have been doing. How is it we destroy businesses? One, we overtax them; two, we overregulate them with red tape; three, we make it hard from a liquidity point of view to get loans from banks, because the Federal officers are looking over the bankers' shoulders second-guessing the loans; fourth, we create an era of uncertainty because we don't know what the silly government is going to do next; and, last of all, we spend money like mad, which then makes the economy that much harder for our businesses to compete in a world competitive environment. But let's take a look at this pie chart here, and there is something here that when you start to think about it is really a little bit on the frightening side. Let's take a look at some of the big chunks of money. The bottom one down here is defense. The Constitution of the United States says that the Congress will provide for the national defense. It is the one main thing that Congress is supposed to do. States can't do it; locales can't do it. It is something that has to be done by the Federal Government. That is why our U.S. Constitution says even in the preamble to provide for the national defense. That is $692 billion here in the 2010 budget. So there is defense. This over here is the non-defense, what is called discretionary. These are the funds that Congress spends every year, and that is $666 billion. This includes things like the Education Department, the Energy Department, the Department of Commerce. It would be jails and prisons, things like that. All of those, the Park Service, would all be in this non-defense discretionary area. So these two, kind of similar size, running in there about a little bit under $1.5 trillion in total. Now, the other one that I want to call to your attention, though, is all the rest of these. This is Social Security, this is Medicare, this is Medicaid. And so what these things are, a lot of times people call them mandatory spending. What does that mean? Well, what it means is that sometime a long time ago a Congress came along, passed these laws, and the law works like a little machine and the machine spits out dollar bills whenever anybody meets certain criteria. So we call it an entitlement. These little machines are spitting out, printing out, dollars; and the Congress doesn't have to do anything at all and the Federal Government is spending lots of money. How much money? Well, Social Security, there is $700 billion, there is another $519 billion in Medicare, and Medicaid, $273 billion. Another thing that works a little bit like an entitlement is the debt. So if we sell a Treasury bill, we have to pay the interest on it; and when we do that, we get this interest. And then there is these other mandatory things which are really other kinds of entitlements. So it is not just Social Security, Medicare and Medicaid. You have got SCHIP, you have got food stamps and things like that that are additional entitlements. So these things here, when you put all of these together, this is kind of a spooky number. These things come out not too far away from a little over $2 trillion, maybe $2.3 trillion. And what does that mean, $2.3 trillion? What that is, that also is the amount of revenue in a given year for the Federal Government. So what has happened is all these entitlements now plus the interests on the debt have gotten to the point that they are chewing up all the money that the Federal Government takes in in taxes in a given year. So then the question is, well, how about defense? How about non-defense discretionary? How about these things? Do we have any money? No. The point of the matter is you can zero this out, zero these out, and these together are using all of the money that the Federal Government is taking in in revenue in a given year. Now, that is kind of scary. What that says is that we are starting to run deficits of over $1 trillion. In fact, the Obama deficits for the last 2 years have been about $1.5 trillion. That is a lot of money. That is three times a bigger deficit than President Bush's worst budget deficit. So you take his worst budget deficit, which is about $450 billion, and we are talking the last 2 years we are running at a $1.5 trillion deficit. So this is what is going on. So let's take a look. If you are like an awful lot of Americans, you want to solve a problem. We have got a problem here. We are apparently spending too much money. So you say, well, what are our alternatives? How do we approach this? I am thankful this evening also that we have got one of our very bright young freshmen Congressmen from the State of Colorado. Scott is here to join us, Scott Tipton. Scott, I just want to make sure you knew, any time you want to jump in here, we could talk a little bit about this. What is your reaction here? You are a little bit newer here to D.C. But you take a look the size of this entitlement that is the same size as what we take in for a whole year, isn't that a little bit of a spooky thing to be walking down here and run into this as a problem?

Mr. AKIN. I thank you, Mr. Speaker. You've done an admiral job. Thank you very much, Scott Tipton, from Colorado--a great new Congressman--and the very top of the evening to the rest of my colleagues.

Mr. AKIN. Right. I think a lot of ways that you hear people talking about how do you get into this kind of problem, some people who are already very senior and dependent on some of these things, you're probably not going to touch their things at all. But it may be that the people who were not--maybe people in their thirties or forties, you put a different kind of program together and may give them some alternatives: Choose this, this, or this. Those are the kinds of ideas we've got to look at, but we have to be honest with ourselves. I wasn't really aware of how bad these numbers were, even though I've been here for a while, until a few months ago. These entitlements are totally absorbing, even now, all of our revenues here. So really this is a little bit like the guy who's overweight. He's got a choice. You know, you're either going to have to reduce the spending here or you're going to have to somehow get in more revenue. The interesting fact on this is that there is evidence to suggest that, when you drop taxes, you actually get more revenue. As a business guy, you probably understand that to some degree, Scott. So here is an example of this top marginal tax rate. Back here in 1960, it was up at 90 percent for the guys making the most money. As this thing was brought down--Ronald Reagan brought it down a lot--what happened, as you see, is that the total Federal tax receipts actually increased. A lot of times, it seems like: How in the world can you drop taxes and get more revenue from the government? Scott, say you were sort of king for a day and you had to put a tax on a loaf of bread, not for a day but for a year, and that you've got to get the maximum revenue for your little kingdom by taxing bread. You think, Huh, I'll put a penny tax on it. Then you think, No, $10. Then you think, Well, if I do $10, not enough people will buy the bread. So you come up, and at a certain point, you've got an optimum tax. If you raise it, you lose revenue. If you reduce it, you don't. So there is an optimum point. What this thing called a Laffer curve shows us is that, as we drop taxes, we actually get more revenue into the Federal Government. So, to a degree, we can use growth of the revenue to deal with some of the problem. The trouble is that it's not anywhere near going to deal with all of it, which means, no matter what you do, you're going to have to cut spending, particularly that entitlement spending. So we have to do that sensitively and carefully. It's going to be politically controversial, but we've got to do something.

Mr. AKIN. Scott, when I heard you talking, it just kind of reminded me, a few years back I spent a fair amount of time with the Boy Scouts because I had four kids that went through the Boy Scouts program. They got to be Eagle Scouts and all. One of the things we always used to say, and to me, at least, it paints kind of a picture. You move in with the Boy Scouts to a camping area, and some of them a little wet behind the ears, but they somehow get the tents all assembled and they'd have a little bit of fun spraying some hairspray into the fire and things that little kids do; yet when it came time to clean up, we had this one rule, and that is you're going to leave the campsite better than you found it. Our forefathers, my immediate parents, dad fought in World War II, and he had the attitude that we've got a job to get done and we're going to go over and get the job done. And they came back with the attitude that they wanted to give you and me a better life and better opportunities than what they had. And we've always wanted to pass that down. Now I've got some kids of my own and I want to pass to them a better America, and yet what we're doing is we're passing them this tremendous debt. And we're the first generation that's really passing a worse America off to our kids than what we had before. And I think that's why your constituents elected you to come down here and get this thing straightened out.

Mr. AKIN. Let's take a look at this problem because you've got all these entitlements. And this represents all the money that comes in in a year. Then things here are beyond. And yet we're thinking that you've got to do defense and you've got to have the park open or you've got to have a prison open. So how are you going to deal with this problem? Let's take a look at the next chart. This is an optimistic way of saying it. This is Medicaid, Medicare, Social Security, and it shows over time--this is 1965--and over time, these things are getting bigger because some of us baby boomers are coming along and putting more demand on the system. But this is an optimistic chart because the problem with it is you don't have the other entitlements in here or the debt service. So what the problem is, if you put those other things in, what we're saying with this first pie chart is that, as you take a look at our revenue from taxes, it's averaging about 18 percent. So here comes the revenue along at an average of 18 percent, and here we are at 2011, somewhere in here, and you put these other things in and it comes all the way up to here. We can zero defense. We can take every soldier off the field, every ship out at sea, every plane out of here. We can zero defense to zero and all the other discretionary spending and, boom, here we are. Our entitlements have eaten up everything that the government takes. One of the things that I find amusing and I've had to struggle with a little bit, too, is the idea of how you lose weight. You get older. I used to eat the double pecan pie ala mode, no problem, up to my mid- forties. But as you get a little older, you've got to watch that carrot cake or cheesecake or whatever. There's all of these ways of packaging weight loss programs, but the hard facts are there's just two variables: one is how much exercise you get, and how much food you eat. And, unfortunately, all of these supposedly complicated budget things come down to two things: how much money you're going to spend and how much revenue you've got coming in. And the problem is here, this 18 percent. I'd like to talk to this in a couple of minutes. I don't think we can increase the amount of Federal revenue that much. Maybe we can do some things to get that to improve. But you can raise taxes, but the trouble is you raise taxes, you do just what you're saying: You crash the economy; the businesses close; there aren't jobs; you aren't picking up tax revenue. So you can raise taxes, but it doesn't actually get you more money. And yet we've got all this spending going on, which says it's a little bit like if you can't do any more exercise, you're going to have to stop eating. We're going to have to stop spending on all these things. Jump in, Scott.

Mr. AKIN

Mr. AKIN. Let me just stop you. I want to cut in on you. What you are saying is most businessmen, if you tell them we are having trouble with overspending so what we are going to do is spend some more, they are going to laugh you out of the shop; is that basically what it boils down to?

Mr. AKIN. That is an interesting concept, and I would like to pick that theme up. That is something we really need to understand. I assume you were a member of the Ohio Legislature at one time?

Mr. AKIN. Oh, boy. Well, we have another gentleman here, coming a little farther from the west, Congressman Bishop, who is joining us. He is also a guy who has had some experience in the business world, and also as a teacher and a leader here on the floor. He has represented his district on some armed services kinds of issues and is somebody who has really earned the respect of his colleagues and has done a great job in setting up some of the new rules that have been established for this Congress. Congressman Bishop, I would be delighted to have you join us. You have heard what we are talking about. We have a problem. We are spending too much money, and the question is what should we do about it.

Mr. AKIN. May I interrupt. You said raise the personal income tax in Illinois. Was it by 6 percent?

Mr. AKIN. Whoa, 40 percent. That is a number.

Mr. AKIN. As I recall, gentleman, at that time, weren't there people who said that income tax could possibly get as high as 5 percent and they were laughed off the floor of the Congress, that income taxes could get as high as 5 percent? Am I right on that?

Mr. AKIN. We're not proud of everybody from Missouri, gentleman.

Mr. AKIN. No.

Mr. AKIN. Just interrupting again, what you're really saying is that you can get more revenue in a State if you back off on taxes?